HM Treasury has published a consultation response and draft statutory instrument on reforms to the high net worth and sophisticated investor exemptions under the financial promotions regime. The Financial Services and Markets Act 2023 (which we discuss in our client note, "A Boost for UK Financial Services") made amendments to the Financial Promotion Restriction, banning authorized firms from approving the financial promotions of unauthorized firms unless they have received approval from the FCA to have the prohibition removed in whole or in part. The gateway will apply from February 7, 2024. However, the restriction does not apply where exemptions exist, such as those for high net worth or sophisticated investors.
HM Treasury consulted on changes to the exemptions to mitigate their misuse and enhance consumer protection. Issues with the use of the exemptions were highlighted in the Treasury Select Committee's report on the failure of London Capital & Finance, which found that even vulnerable and low-income investors were being coaxed into self-certifying as high net worth or sophisticated investors. In light of responses received to the consultation, HM Treasury has determined to:
These changes will also be applied to the equivalent exemptions for the promotion of collective investment schemes.
The government plans to bring the changes into force on January 31, 2024, Parliamentary time permitting. There will be no transitional regime. Businesses that have made promotions prior to January 31, 2024, will continue to be able to send follow-up financial promotions to the relevant individual in relation to the same matter for the standard 12-month period without requiring an updated investor statement. New promotions made from January 31, 2024, will need to comply with the new rules, even if they are made to those who have previously received promotions.
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